Oracle’s Q3 2012 results have been received with a degree of relief because they have recovered from what the company described as the “aberration” of Q2 (see here) as the company focused on execution (which it said was lacking in Q2). Yet, there are still some unsettling aspects to the numbers, beyond the obvious hardware area.
Overall revenue was up 3% to $9.1bn but that was ahead of street expectations of $9bn. Within that, new software sales rose 7% to $2.4bn which was towards the high end of Oracle’s own forecasts of 0% to 10%. However, that looks staid compared to SAP’s 16% software growth rate for its most recent quarter (to the end of December 2011) and 11% uplift in overall revenue (see SAP has its best year yet). Oracle’s new software sales growth rate is on a declining trend - in 2011 it was broadly in double digits.
The company says its main competition is still SAP but we think the SaaS providers are making their presence felt more than Oracle will admit. Its own SaaS plans are underway but will take time to show results. One of the most immediate results will be flagging new software revenue as sales shift from a licence to a subscription model, which will bring further fluctuations to Oracle’s numbers. This underlines how hard it is for the leading large software vendors to make the transition.
Oracle’s 16% drop in hardware revenue to $869m (against an expected decline in the 5% to 15% region), helped peg overall revenues down. The company ended the quarter with net profit up 18% to $2.5bn, so it is managing costs.
Q4 forecasts are not particularly uplifting – new software is forecast at minus 2% to plus 8%, with Oracle saying it is being conservative in its outlook. For many vendors the sort of growth Oracle is delivering would demonstrate strong performance but more is expected of Oracle given its market influence, past performance and acquisition-led diverse areas of activity.